A new and generalized lattice Boltzmann model for simulating thermal two-phase flow is described. In this model, the single component multi-phase lattice Boltzmann model proposed by Shan and Chen is used to simulate the fluid dynamics. The temperature field is simulated using the passive-scalar approach, i.e., through modeling the density field of an extra component, which evolves according to the advection-diffusion equation. By coupling the fluid dynamics and temperature field through a suitably defined body force term, the thermal two-phase lattice Boltzmann model is obtained. In this paper, the theoretical foundations of the model and the validity of the thermal lattice Boltzmann equation method are laid out, illustrated by analytical and numerical examples. In a companion paper (P. Yuan and L. Schaefer, 2006, ASME J. Fluids Eng., 128, pp. 151–156), the numerical results of the new model are reported.